**Exhibit10.2:**

 

Material Contracts

 

**MODIFICATION,RESTATEMENT, AND CONSOLIDATION OF UNFUNDED DEFERRED COMPENSATION PLAN ANDCHANGE IN CONTROL COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS AMENDED ANDRESTATED AS OF OCTOBER 15, 2002**

 

This Modification, Restatement, and Consolidation ofUnfunded Deferred Compensation Plan for Non-Employee Directors (hereinafter“Plan”) is made as of the 15th day of October, 2002 by F&MBancorp (hereinafter the “Company”).

 

WHEREAS, the Company presently has in place anUnfunded Deferred Compensation Plan for Non-employee Directors; and,

 

WHEREAS, the Company has determined to make certainamendments to the Plan and to simplify the administration of the Plan byconsolidating all amendments into one document which restates the Plan;

 

NOW, THEREFORE, and in consideration of the premisesand of other good and valuable consideration the receipt of which is herebyacknowledged by each of the parties hereto, the parties hereto do herebycovenant and agree as follows:

 

**I.  CONSOLIDATION.**

 

Consolidation ofAmendment.  From andafter the date hereof, the Plan evidenced by the Unfunded Deferred CompensationPlan for Non-Employee Directors as amended shall be consolidated into thissingle Plan document.

 

**II.  MODIFIED ANDRESTATED TEXT:  UNFUNDED DEFERREDCOMPENSATION PLAN AND CHANGE IN CONTROL COMPENSATION PLAN FOR NON-EMPLOYEEDIRECTORS**

 

THIS PLAN is adopted as of the 15th day of October, 2002 byF&M Bancorp (hereinafter the “Company”).

 

**INTRODUCTION**

 

To encourage Directors to remain a member of the Company’s Board ofDirectors, the Company is willing to provide to Directors a deferred feeopportunity and change in control benefit. The Company will pay the benefits from its general assets.

 

### **Article1**

**DEFINITIONS**

 

1.1.  Definitions.  Whenever used in this Plan, the followingwords and phrases shall have the meanings specified:

 

1.1.1.“Change-in-Control” of the Employers. Change-in-Control shall be deemed to have occurred if the event setforth in any one of the following paragraphs shall have occurred:

 

any Person is or becomes the Beneficial Owner, directly or indirectly,of securities of the Company (not including in the securities beneficiallyowned by such Person any securities acquired directly from the Company or itsAffiliates) representing 25% or more of the combined voting power of theCompany’s then outstanding securities, excluding any Person who becomes such aBeneficial Owner in connection with a transaction described in clause (A) ofparagraph (iii) below; or

 

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the following individuals cease for any reason to constitute a majorityof the number of directors then serving on the Board; individuals who, on thedate hereof, constitute the Board and any new director (other than a directorwhose initial assumption of office is in connection with an actual orthreatened election contest, including but not limited to a consentsolicitation, relating to the election of directors of the Company) whoseappointment or election by the Board or nomination for election by theCompany’s shareholders was approved or recommended by a vote of at leasttwo-thirds (2/3) of the directors then still in office who either weredirectors on the date hereof or whose appointment, election or nomination forelection was previously so approved or recommended;

or

there is consummated a merger or consolidation of the Company or anydirect or indirect subsidiary of the Company with any other corporation, otherthan (A) a merger or consolidation which would result in the voting securitiesof the Company outstanding immediately prior to such merger or consolidationcontinuing to represent (either by remaining outstanding or by being convertedinto voting securities of the surviving entity or any parent thereof), incombination with the ownership of any trustee or other fiduciary holdingsecurities under an employee benefit plan of the Company or any subsidiary ofthe Company, at least 60% of the combined voting power of the securities of theCompany or such surviving entity or any parent thereof outstanding immediatelyafter such merger or consolidation, or (B) a merger or consolidation effectedto implement a recapitalization of the Company (or similar transaction) inwhich no Person is or becomes the Beneficial Owner, directly or indirectly, ofsecurities of the Company (not including in the securities Beneficially Ownedby such Person any securities acquired directly from the Company or itsAffiliates) representing 25% or more of the combined voting power of theCompany’s then outstanding securities.

the shareholders of the Company approve a plan of complete liquidationor dissolution of the Company or there is consummated an agreement for the saleor disposition by the Company of all or substantially all of the Company’sassets, other than a sale or disposition by the Company of all or substantiallyall of the Company’s assets to an entity, at least 60% of the combined votingpower of the voting securities of which are owned by shareholders of theCompany in substantially the same proportions as their ownership of the Companyimmediately prior to such sale;

the Company ceases to own, directly or indirectly, securities of anysubsidiary representing 50% or more of the combined voting power of thesubsidiary’s then outstanding securities; or

there is consummated an agreement for the sale or disposition by theCompany of all or substantially all of a subsidiary’s assets, other than a saleor disposition by the Company of all or substantially all of the subsidiary’sassets to an entity, at least 60% of the combined voting power of the votingsecurities of which are owned by shareholders of the Company in substantiallythe same proportions as their ownership of the subsidiary immediately prior tosuch sale; provided however, that such a sale or disposition should only be effectivefor those Executives, if any, employed by the subsidiary whose assets are sosold or otherwise disposed of, and not all participating Executives.

“Affiliate” shall have the meaning set forth in Rule 12b-2 promulgatedunder Section 12 of the Exchange Act.

 “Beneficial Owner” shall havethe meaning set forth in Rule 13d-3 under the Exchange Act.

“Board” shall mean the board of directors of the Company.

“Exchange Act” shall mean the Securities Exchange Act of 1934, asamended from time to time.

“Person” shall have the meaning given in Section 3(a)(9) of theExchange Act, as modified and used in Sections 13(d) and 14(d) thereof, exceptthat such term shall not include (i) the Company or any of its subsidiaries,(ii) a trustee or other fiduciary holding securities under an employee benefitplan of the Company or any of its Affiliates, (iii) an underwriter temporarilyholding securities pursuant to an offering of such securities, or (iv) acorporation owned, directly or indirectly, by the shareholders of the Companyin substantially the same proportions as their ownership of stock of theCompany.

A “Potential Change-in-Control” shall be deemed to have occurred if theevent set forth in any one of the following paragraphs shall have occurred:

the Company enters into an agreement, the consummation of which wouldresult in the occurrence of a Change-in-Control;

the Company or any Person publicly announces an intention to take or toconsider taking actions which, if consummated, would constitute aChange-in-Control;

 

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any Person becomes the Beneficial Owner, directly or indirectly, ofsecurities of the Company representing 15% or more of either the thenoutstanding shares of common stock of the Company or the combined voting powerof the Company’s then outstanding securities (not including in the securitiesbeneficially owned by such Person any securities acquired directly from theCompany or its affiliates); or

(iv)          the Board adopts aresolution to the effect that a Potential Change-in-Control has occurred.

1.1.2.  “Company” means each of F&M Bancorp, itsdirect or indirect wholly-owned subsidiaries, and its other direct or indirectsubsidiaries that adopt this Plan.

 

1.1.3.  “Code” means the Internal Revenue Code of1986, as amended.  References to a Codesection shall be deemed to be to that section as it now exists and to anysuccessor provisions.

 

1.1.4.  “Disability” means the Director’s inabilityto perform substantially all normal duties of a Director, as determined by theCompany’s Board of Directors in its sole discretion.  As a condition to any benefits, the Company may require theDirector to submit to such physical or mental evaluations and tests as theBoard of Directors deems appropriate.

 

1.1.5.  “Election Form” means the Form attached asExhibit 1.

 

1.1.6.  “Fees” means any and all of the totaldirector’s fees payable to the Director.

 

1.1.7.  “Mandatory Termination Date” means theannual meeting at which the Director’s term expires first occurring followingthe Director attaining age 70, except for those Directors serving in thatcapacity on March 11, 1975, for whom no Mandatory Termination Date exists.

 

1.1.8.  “Termination of Service” means the Directoris ceasing to be a member of the Company’s Board of Directors for any reasonwhatsoever.

 

**Article 2**

 

**Deferral Election**

 

2.1.  Initial Election.  Current Directors shall have made an initial deferral electionunder this Plan by filing with the Company a signed Election Form in December,2001.  Directors commencing serviceafter October 15, 2002 will make an initial deferral election by filing withthe Company a signed Election Form within 30 days of commencing service.  The Election Form shall, in all instances,set forth the amount of Fees to be deferred and the form of benefitpayment.  The Election Form shall beeffective to defer only Fees earned after the date the Election Form isreceived by the Company.

 

2.2.  Election Changes

 

2.2.1.  Annual. Directors will be required to make an election annually in December byfiling a signed Election Form with the Company.  The Election Form shall be effective for the following calendaryear.

 

2.2.2.  Hardship. If an unforeseeable financial emergency arising from the death of afamily member, divorce, sickness, injury, catastrophe or similar event outsidethe control of the Director occurs, the Director, by written instructions tothe Company may reduce future deferrals under this Plan.

 

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**Article 3**

 

**Deferral Account**

 

3.1.  Establishing and Crediting.  The Company shall establish a deferralaccount (“Deferral Account”) on its books for the Director, and shall credit tothe Deferral Account the following amounts:

 

3.1.1.  Deferrals. The Fees specified to be deferred by the Director (including feesdeferred under earlier versions of this Plan) as of the time the Fees wouldhave otherwise been paid to the Director.

 

3.1.2.  Interest Rate.  For each calendar year, interest shall be calculated at a rateequal to the “prime rate” as published in the Wall Street Journal’s Money RatesTable, or the highest rate if more than one rate is published on December 15 ofthe immediately preceding year, or if the 15th is not a business day, then thenext business day. For example, for calendar year 1997, the interest rate shallbe the prime rate as published in the Wall Street Journal on December 15,1996.  Notwithstanding the foregoing,the interest rate to be paid on the balance of the Deferral Account from July 1through December 31, 1996 shall be the prime rate as published in the WallStreet Journal’s Money Rates Table on July 1, 1996.

 

3.1.3.  Interest Accrual.  Interest will be compounded daily at the rate specified inparagraph 3.1.2. and credited to the Deferral Account monthly and immediatelyprior to the payment of any benefits.

 

3.2.  Statement of Accounts.  The Company shall provide to the Director,within one hundred twenty (120) days after each calendar year end, a statementsetting forth the Deferral Account balance.

 

3.3.  Accounting Device Only.  The Deferral Account is solely a device formeasuring amounts to be paid under this Plan. The Deferral Account is not a trust fund of any kind.  The Director is a general unsecured creditorof the Company for the payment of benefits. The benefits represent the mere Company promise to pay suchbenefits.  The Director’s rights are notsubject in any manner to anticipation, alienation, sale, transfer, assignment,pledge, encumbrance, attachment, or garnishment by the Director’s creditors.

 

**Article 4**

 

**Lifetime Benefits**

 

4.1.  Normal Termination Benefit.  Upon the Director’s Termination of Serviceat the Director’s Mandatory Retirement Date, or for those Directors for whom noMandatory Retirement Date exists, when such a Director’s Termination of Serviceoccurs after such Director has attained age 70, the Company shall pay to theDirector the benefit described in this Section 4.1.

 

4.1.1.  Amount of Benefit.  The benefit under this Section 4.1 is the Deferral Accountbalance at the Director’s Termination of Service.

 

4.1.2.  Payment of Benefit.  The Company shall pay the benefit to theDirector in the form elected by the Director on the Election Form.  If the ten (10) year payment is elected, theamount of the accrued benefit payment will be calculated by using the ten (10)year annuity rate determined using the sum of the mid-term Applicable FederalRate (AFR) for the previous month as published monthly by the Internal RevenueService, plus 1% rounded to the nearest 1/2 of 1%. Payment shall be made (orpayments shall commence, depending on the Director’s election) on the 1stday of the month following the Director’s Termination of Service.

 

4.2.  Early Termination Benefit.  If the Director terminates service as aDirector before the Mandatory Termination Date, the Company shall pay to theDirector the benefit described in this Section 4.2.

 

4.2.1.  Amount of Benefit.  The benefit under this Section 4.2 shall be the Deferral Accountbalance at the Director’s Termination of Service.

 

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4.2.2.  Payment of Benefit.  The Company shall pay the benefit to theDirector in the form elected by the Director on the Election Form.  Payment shall be made (or payments shallcommence, depending on the Director’s election) on the 1st day ofthe month following the Director’s Termination of Service.  If the ten (10) year payment is elected, theamount of the accrued benefit payment will be calculated by using the ten (10)year annuity rate determined using the sum of the mid-term Applicable FederalRate (AFR) for the previous month as published monthly by the Internal RevenueService, plus 1% rounded to the nearest 1/2 of 1%.

 

4.3.  Disability Benefit.  If the Director terminates service as aDirector for Disability prior to the Mandatory Termination Date, the Companyshall pay to the Director the benefit described in this Section 4.3.

 

4.3.1.  Amount of Benefit.  The benefit under this Section 4.3 is the Deferral Accountbalance at the Director’s Termination of Service.

 

4.3.2.  Payment of Benefit.  The Company shall pay the benefit to theDirector in the form elected by the Director on the Election Form. Paymentshall be made (or payments shall commence, depending on the Director’selection) on the 1st day of the month following the Director’sTermination of Service.   If the ten(10) year payment is elected, the amount of the accrued benefit payment will becalculated by using the ten (10) year annuity rate determined using the sum ofthe mid-term Applicable Federal Rate (AFR) for the previous month as publishedmonthly by the Internal Revenue Service, plus 1% rounded to the nearest 1/2 of1%.

 

4.4.  Change of Control Benefit.  Upon a Change of Control while the Directoris in the active service of the Company, the Company shall pay to the Directorthe benefit described in this Section in lieu of any other benefit under thisPlan.

 

4.4.1.  Amount of Benefit.  The benefit under this Section 4.4. is the Deferral Accountbalance at the date of the Director’s Termination of Service, if participatingin the deferred compensation portion of the plan, plus a cash payment equal tothree (3) times the then current annual retainer paid by the company.

 

4.4.2.  Payment of Benefit.  The Company shall pay the benefit to theDirector in a lump sum within ninety (90) days after the Director’s Terminationof Service.  The lump sum payment (thecash payment equal to three (3) times the then current annual retainer paid bythe company plus, as applicable, the Deferred Account balance) shall include anadditional amount equal to the excise tax, if any, imposed on the paymentpursuant to Section 4999 of the Internal Revenue Code.  The Director and the company shall cooperatewith one another in calculating the amount of the excise tax and in connectionwith any administrative and/or indirect proceeding.  Concerning the existence or amount of liability for excise taxwith respect to the lump sum payment.

 

4.5.  Hardship Distribution.  Upon the Company’s determination (following petitionby the Director) that the Director has suffered an unforeseeable financialemergency as described in Section 2.2.2., the Company shall distribute to theDirector all or a portion of the Deferral Account balance as determined by theDirector, but in no event shall the distribution be greater than is necessaryto relieve the financial hardship.  TheDirector expressly accepts the responsibility for all income tax implicationsresulting from Director’s exercise of Director’s rights under this Section.

 

**Article 5**

 

**Death Benefits**

 

5.1.  Death During Active Service.  If the Director dies while in the activeservice of the Company, the Company shall pay to the Director’s beneficiary thebenefit described in this Section 5.1.

 

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5.1.1.  Amount of Benefit.  If Company owned life insurance is in force on the life of theDirector on the date of the Director’s death, the benefit under Section 5.1 isthe projected age 70 benefit based on the Deferred Account balance andprojected further deferrals until age 70. If Company owned life insurance is not in force on the life of theDirector on the date of Director’s death, the benefit will be the DeferralAccount balance on the date of death of the Director.

 

5.1.2.  Payment of Benefit.  The Company shall pay the benefit to thebeneficiary in one hundred twenty (120) equal monthly installments commencingon the first day of the month following the Director’s death.

 

5.2.  Death During Benefit Period.  If the Director dies after benefit paymentshave commenced under this Plan but not before receiving all such payments, theCompany shall pay the remaining benefits to the Director’s beneficiary at thesame time and in the same amounts they would have paid to the Director had thedirector survived.

 

**Article 6**

 

**Beneficiaries**

 

6.1.  Beneficiary Designations.  The Director shall designate a beneficiaryby filing a written designation with the Company.  The Director may revoke or modify the designation at any time byfiling a new designation.  However,designations will only be effective if signed by the Director and accepted bythe Company during the Director’s lifetime. The Director’s beneficiary designation shall be deemed automaticallyrevoked if the beneficiary predeceases the Director, or if the Director names aspouse as beneficiary and the marriage is subsequently dissolved.  If the Director dies without a validbeneficiary designation, all payments shall be made to the Director’s survivingspouse, if any, and if none, to the Director’s surviving children and thedescendants of any deceased child by right of representation, and if nochildren or descendants survive, to the Director’s estate.

 

6.2.  Facility of Payment.  If a benefit is payable to a minor, to aperson declared incompetent, or to a person incapable of handling thedisposition of his or her property, the Company may pay such benefit to theguardian, legal representative or person having the care or custody of suchminor, incompetent person or incapable person.  The Company may require proof of incompetency, minority orguardianship as it may deem appropriate prior to distribution of thebenefit.  Such distribution shallcompletely discharge the Company from all liability with respect to suchbenefit.

 

**Article 7**

 

**Claims and Review Procedure**

 

7.1.  Claims Procedure.  The Company shall notify the Director’s beneficiary in writing,within ninety (90) days of his or her written application for benefits, of hisor her eligibility or non-eligibility for benefits under the Plan .  If the Company determines that thebeneficiary is not eligible for benefits or full benefits, the notice shall setforth (1) the specific reasons for such denial, (2) a specific reference to theprovisions of the Plan on which the denial is based, (3) a description of anyadditional information or material necessary for the claimant to perfect his orher claim, and a description of why it is needed, and (4) an explanation of thePlan’s claims review procedure and other appropriate information as to thesteps to be taken if the beneficiary wishes to have the claim reviewed.  If the Company determines that there arespecial circumstances requiring additional time to make a decision, the Companyshall notify the beneficiary of the

 

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special circumstances and the date by which a decision is expected tobe made, and may extend the time for up to an additional ninety-day period.

 

7.2.  Review Procedure.  If the beneficiary is determined by the Company not to beeligible for benefits, or if the beneficiary believes that he or she isentitled to greater or different benefits, the beneficiary shall have theopportunity to have such claim reviewed by the Company by filing a petition forreview with the Company within sixty (60) days after receipt of the noticeissued by the Company.  Said petitionshall state the specific reasons which the beneficiary believes entitles him orher to benefits or to greater or different benefits.  Within sixty (60 days after receipt by the Company of thepetition, the Company shall afford the beneficiary (and counsel, if any) anopportunity to present his or her position to the Company orally or in writing,and the beneficiary (or counsel) shall have the right to review the pertinentdocuments.  The Company shall notify thebeneficiary of its decision in writing within the sixty-day period, statingspecifically the basis of its decision, written in a manner calculated to beunderstood by the beneficiary and the specific provisions of the Plan on whichthe decision is based.  If, because ofthe need for a hearing, the sixty-day period is not sufficient, the decisionmay be deferred for up to another sixty-day period at the election of the Company,but notice of this deferral shall be given to the beneficiary.

 

**Article 8**

 

**Amendments and Termination**

 

The Plan may be amendedor terminated at any time by the Company but no modification or terminationshall effect the rights of any Director who is at the time or had previouslyelected to defer Fees unless such Director and the Company shall mutually agreein writing.

 

**Article 9**

** **

**Miscellaneous**

 

9.1.  Binding Effect.  This Plan shall bind the Director and the Company and theirbeneficiaries, survivors, executors, administrators and transferees.

 

9.2.  No Guaranty of Employment.  This Plan is not a contract forservices.  It does not give the Directorthe right to remain a Director of the Company, nor does it interfere with anyrights to replace the Director.  It alsodoes not require the Director to remain a Director nor interfere with theDirector’s right to terminate services at any time.

 

9.3.  Non-Transferability.  Benefits under this Plan cannot be sold,transferred, assigned, pledge, attached or encumbered in any manner.

 

9.4.  Applicable Law.  The Plan and all rights hereunder  shall be governed by the Laws of the State of Maryland, except tothe extent preempted by the Laws of the United States of America.

 

9.5  Unfunded Arrangement.  The Director and beneficiary are generalunsecured creditors of the Company for the payment of benefits under thisPlan.  The benefits represent the merepromise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation,alienation, sale, transfer, assignment, pledge, encumbrance, attachment, orgarnishment by creditors.  Any insuranceon the Director’s life is a general asset of the Company to which the Directorand Beneficiary have no preferred or secured claim.

 

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